Life/risk advisers are still hanging onto a commission of some sort even if they had reduced it, but will need to diversify their revenue streams and transition out from being pure insurance advisers, according to Aon Hewitt.
Research and strategy manager for financial advice, Aileen Oliver, said advisers feared less clients would take out insurance if they adopted fee-for-service because of the additional cost to advice due to increased premiums, and advisers were questioning if the premiums would drop as a result of reduced or no commissions.
"In the short-term the insurance companies will need to make changes to their systems, processes etc. so they'll need money to do that," Oliver said.
"It's sitting down and looking at their business and working out the impact to it, how they can change it, etc. make sure they've still got revenue coming in."
Oliver said it was vital for advisers to accept a world of reduced or no commissions in the longer term and diversify their revenue streams and provide investment and comprehensive advice to articulate their value and justify moving towards a pure fee-for-service.
"Otherwise they'll have clients coming in and they just won't be able to articulate the value and they'll just go elsewhere and they'll have no new clients coming in. It'll be tough," Oliver said.
She also suggested a gradual transition where advisers moved one out of four clients to a fee-for-service model instead of upfront commissions in order to prevent a huge impact on revenue streams at once.